Lecture 4-5

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Questions and Answers

What is the primary distinction between business markets and consumer markets?

Business markets have more retail outlets than consumer markets

Business markets have more buyers than consumer markets

Business markets have fewer, larger buyers than consumer markets (correct)

Business markets are smaller in scope than consumer markets

What characterizes the supplier-customer relationships in business markets?

Arm's length, with minimal customization

Close, with suppliers expected to customize offerings (correct)

Adversarial, with suppliers competing against customers

Distant, with multiple suppliers competing for business

What is a key feature of organizational buying behavior?

Suppliers have significant influence over purchasing decisions

Buying decisions are typically made by a single person

Impulse purchases are common

Trained purchase agents follow organizational policies (correct)

What is a key difference between B2B and B2C purchases?

B2B purchases involve multiple buying influences, while B2C purchases do not Signup and view all the answers

What is a characteristic of the sales process in business markets?

Multiple sales calls are often required to close a deal Signup and view all the answers

What is the primary factor that influences the demand in B2B markets?

Demand in B2C markets Signup and view all the answers

What is the term for a buying situation in which a purchase department reorders supplies on a routine basis?

Straight rebuy Signup and view all the answers

What is the primary goal of business buyers in the purchasing process?

To seek the highest benefit package Signup and view all the answers

What is the first stage in the buying process according to the buy-grid framework?

Problem recognition Signup and view all the answers

What is the term for a website that connects invited groups of suppliers and partners on the web?

Private exchange Signup and view all the answers

Which of the following is a drawback of online business buying?

Erosion of supplier-buyer loyalty Signup and view all the answers

What do marketers emphasize to counter requests for lower prices?

The life-cycle cost of using their products are lower compared to competitors Signup and view all the answers

What is the purpose of a blanket contract?

To establish a long-term relationship with agreed prices Signup and view all the answers

What is the acronym PEEST short for?

Political, Economic, Ecological, Social, Technological Signup and view all the answers

What is the main purpose of business legislation?

To protect companies from unfair competition Signup and view all the answers

Which type of marketing program focuses on getting as close and personally relevant to consumers as possible?

Local Marketing Signup and view all the answers

What is the term for dividing buyers into groups based on their personality traits, lifestyle, or values?

Psychographic Segmentation Signup and view all the answers

Which of the following is a base for segmenting business markets?

Demographic variables Signup and view all the answers

What is the primary goal of market targeting?

To decide on how many and which market segments to target Signup and view all the answers

What is the primary benefit of niche marketing, according to the text?

It allows firms to be the 'large fish in the small pool' Signup and view all the answers

What is the term for market segmentation based on when buyers develop a need, make a purchase, or use a market offering?

Behavioral Segmentation Signup and view all the answers

What is the purpose of points-of-parity in positioning?

To negate competitors' points-of-difference Signup and view all the answers

What is the term for the act of designing a company's market offering and image to occupy a distinctive place in the minds of the target market?

Positioning Signup and view all the answers

What is the term for customization that allows customers to design their own market offerings?

Customization Signup and view all the answers

What is the primary criterion for a market segment to be meaningful?

All of the above Signup and view all the answers

What is the main implication of population growth on business practice?

A growing population does not always imply a growing market, unless sufficient purchase power exists Signup and view all the answers

What is the primary driver of the 'intention-behavior gap' in green consumption?

Greenwashing, deceptively persuading the public that their products are environmentally friendly Signup and view all the answers

What is the primary characteristic of 'core cultural values'?

Beliefs that are passed on from parents to children and reinforced through major social institutions Signup and view all the answers

What is the primary advantage of 'mass marketing'?

It creates the largest potential market, leading to lower costs and lower prices or higher margins Signup and view all the answers

What is the primary goal of 'segment group marketing'?

To identify segments and decide which one(s) to target Signup and view all the answers

What percentage of dissatisfied customers actually complain about their purchase?

5% Signup and view all the answers

What is the market offering quality dimension based on?

Customer-perceived quality minus customer-perceived price Signup and view all the answers

What is the primary goal of customer profitability analysis?

To identify ways to improve the value of a company's customer base Signup and view all the answers

What is the primary purpose of personalized marketing in building customer loyalty?

To present new, tailor-made offerings to customers based on collected data Signup and view all the answers

What is the result of handling customer complaints satisfactorily, according to the text?

50-75% of customers continue doing business with the brand Signup and view all the answers

What is the primary purpose of repositioning in marketing?

To adjust a brand's image or offerings in response to changes in the market Signup and view all the answers

What is the main goal of a cost leadership strategy?

To offer a product at a lower price than competitors Signup and view all the answers

What is customer-perceived value?

The difference between a product's benefits and costs as perceived by customers Signup and view all the answers

What is the primary goal of measuring customer satisfaction?

To identify areas for improvement in a company's offerings and operations Signup and view all the answers

What is the link between customer satisfaction and loyalty?

Highly satisfied customers are more likely to be loyal Signup and view all the answers

Study Notes

Consumer Markets

Incomes:
- Very low, mostly low, very low and very high, low, medium and high, or mainly medium incomes
Savings, debts, and credits:
- Consumers with the same income can have different living standards depending on their savings, debts, and needs (health, childcare, transport)
Ecological/Physical Environment:
- Companies creating environmental solutions have a competitive advantage
- Intention-behavior gap in green consumption, and some companies engage in greenwashing
Social, Cultural, and Demographic Environment:
- Population growth has implications for business practice
- Age mix of populations affects demand for certain products (e.g., toys for younger, medical services for older)
- Cohorts: groups of individuals with similar values, preferences, and purchase patterns shaped by "defining moments"
- Diversity of marketing: countries vary in composition (ethnicity, religion, etc.)
- Educational backgrounds shape interests, preferences, and purchase patterns
- Household patterns: traditional households, single households, and changing family structures

Technological Environment

One of the most dramatic forces shaping consumers' lives and challenging for firms
New technologies influence the economy's growth rate and create long-term consequences that are difficult to forecast

Marketing Segmentation and Targeting

Mass marketing: one offering for all, creating the largest potential market, lower costs, and lower prices or higher margins
Micromarketing: alternative to mass marketing, more common in today's competitive landscape, with four levels: segments, niches, local areas, and individuals
Segment group marketing: grouping customers based on similar needs and wants, enhancing the chance to positively differentiate offerings from competitors
Niche marketing: targeting specific segments or niches with tailored products or services

Business Markets

Organizational buying: decision-making process by which formal organizations establish the need for products and services
Business market: all organizations that acquire goods and services used in the production of other goods and services sold, rented, or supplied to others
Fewer, larger buyers than in consumer markets, with often a symbiotic relationship between suppliers and buyers
Professional purchasing: trained purchase agents follow organizational purchase policies, constraints, and requirements
Multiple buying influences: more people involved in and influencing purchase decisions in B2B than in B2C settings

Buying Process

Problem recognition: someone in the company recognizes a problem or need that can be met by acquiring a product or service
General need description: determining the general characteristics and required quantity of the needed item
Product specification: developing the technical specifications of the item
Supplier search: identifying appropriate suppliers through various means
Proposal solicitation: inviting qualified suppliers to submit proposals
Supplier selection: specifying desired supplier attributes and evaluating proposals
Order-routine specification: negotiating the final order and delivery details
Performance review: periodically reviewing the performance of the chosen supplier

Marketing Environment

Company's environment: global competition, faster information and communication flow, increased business complexity, and rapidly changing consumer needs and wants
Marketing environment: microenvironment (customers, suppliers, distributors, agencies, and competitors) and macroenvironment (trends and technological advancements, social, cultural, political, ecological, and legal forces)
PEEST: acronym for the five overall forces: political, economic, ecological, social, and technological

Political/Legal Environment

Laws, government agencies, and groups influencing and limiting organizations and individuals
Trends: increased business legislation and growth of special interest groups

Economic Environment

Purchase power depends on income levels, prices, savings, debts, and credit availability
Trends that influence purchase power can have a powerful impact on businesses

Market Targeting and Positioning

Market targeting: selecting the most attractive market segments to target
Effective segmentation criteria: measurable, substantial, accessible, differentiable, and actionable
Positioning: designing the company's market offering and image to occupy a distinctive place in the target market
Points-of-parity (POPs): attributes or benefits that are not unique to a brand
Points-of-difference (PODs): attributes or benefits that are strongly associated with a brand### Market Segmentation
Niche markets: small in volume but have attractive profit and growth potential; marketers seek to be the "large fish in the small pool" by providing the best customer-perceived value.
Local marketing: tailoring marketing programs to target specific local groups, which can increase manufacturing costs and reduce profitability, but allows firms to respond to local requirements more effectively.
Individual marketing: customized marketing where customers become integral to the market offering and design processes, with offerings developed to meet individual needs.

Bases for Segmenting Consumer Markets

Two broad groups of variables: descriptive characteristics and behavioral considerations.
Geographic segmentation: dividing markets into different geographic units, considering regional, rural, and urban characteristics.
Demographic segmentation: dividing markets based on age, life cycle stage, gender, generation, income, and social status.

Demographic Segmentation

Age and life cycle stage: many brands offer product lines targeting children, adults, and older consumers, and sometimes even within these age groups.
Life stage: defines people's major concerns and creates new market segments and requirements in existing markets.
Gender: differences based on biology and socialization influence marketers' strategic decisions.
Generation: may have similar purchase preferences based on shared experiences and values.
Income: established segmentation practice in several product and service categories.
Social status: classified using criteria such as profession, property, education, and income, influencing purchase preferences.

Psychographic Segmentation

Dividing buyers into groups based on personality traits, lifestyle, or values.
Psychographic profiles are developed based on AIO factors, describing individual lifestyles: activities, interests, and opinions.

Behavioral Segmentation

Occasions: distinguishing buyers according to when they develop a need, make a purchase, or use a market offering.
Repositioning: companies must be prepared to make proactive and reactive positioning decisions depending on market conditions, such as when a competitor launches an offering that is as good as or better than the own brand.

Differentiation Strategies

Cost leadership: developing and sustaining cost/efficiency gains by offering a acceptable substitute to competing offerings from a reduced cost base.
Distinctive superior quality: creating strong customer-perceived value for offerings through the right quality attributes and transactional attributes.
Differentiation strategies: attributes, benefits, or values, personnel, channel, and image differentiation.

Customer Value, Satisfaction, and Loyalty

Customer-perceived value: the difference between potential customers' evaluations of all the benefits and costs of a company's offering and the perceived alternatives.
Customer satisfaction: a person's feeling of pleasure or disappointment resulting from comparing a product or service's perceived performance to expectations.
Highly satisfied customers are more likely to be loyal and buy more from the company, while being less price sensitive and costing less to serve.

Monitoring Satisfaction

Periodic surveys, direct questions about customer satisfaction, repurchase, and word-of-mouth.
Customer loss rate, mystery shoppers, and managers examining sales situations to identify weak and strong points.
Monitoring competitors' performance, customer lifetime analysis, and dealing with customer complaints.

Dealing with Customer Complaints

About 25% of the time, customers are dissatisfied with the purchase, but they only complain on 5% of cases.
Complaining customers: 50-75% continue doing business with a brand if it handles the complaint satisfactorily, while almost all continue doing business if the complaint was resolved quickly.
Recommended to make it easy to complain, handle complaints quickly, have empathetic staff, and not blame the customer.

Market Offering Quality Dimension

Customer-perceived quality – customer-perceived price = customer-perceived value.
Quality: the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Maximizing Customer Lifetime Value

The most profitable customers generate the majority of profits, whereas the least profitable customers can substantially reduce profits.
Customer profitability analysis: revenue exceeds costs for attracting, selling, and servicing customers over time.
Ways to improve the value of a company's customer base: reduce customer defection, extend existing and future customer relationships, enhance growth potential, make low-profit customers more profitable, and pay more attention to high-value customers.

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Description

Test your understanding of business markets, organizational buying, and the changing marketing environment. Learn about the decision-making process in formal organizations and how they evaluate alternative brands and suppliers.